Zuchowski to dealers: Get with the times

Hyundai boss says rise of millennials will demand changes

TALK FROM THE TOP with Dave Zuchowski: Hyundai well-positioned for new era

LOS ANGELES -- After years of steady and healthy growth throughout the auto industry, dark clouds are gathering on the horizon.

Rapidly changing demographics, new buying habits, ride-sharing and electrification will soon put the hurt on profits and volume for manufacturers and dealerships alike.

The way Hyundai Motor America CEO Dave Zuchowski sees it, this is not a matter of if but of when. So he's sounding a call to his dealers that their way of doing business must change -- fast.

"Going to market the exact same way we've gone to market the last 100 years isn't going to go very well," Zuchowski told Automotive News. "So we really have to change a lot of the processes we're talking about."

The shifts in the industry are coming from multiple fronts.

Baby boomers, the longtime life-blood of the auto industry, soon will be replaced by millennials as the largest group of car shoppers. About 75 percent of millennials -- 64 million by Hyundai's count -- will be in the market for a new vehicle in the next five years.

Millennials' shopping and buying habits differ from those of previous generations. Thanks to websites such as KBB.com, Edmunds.com and TrueCar and ready access to their smartphones, millennials are walking into showrooms much further down the purchase funnel than many consumers who are older.

Yet when they get there, they are encountering an antiquated and cumbersome buying process.

"The power of information -- which used to belong to businesses -- is now the domain of the consumer," Zuchowski said. "Dealers that don't recognize that and still try to control the sales process and set up dealership infrastructure that's laden with liners and closers and deskers, it just doesn't make sense anymore."

Reducing turnover and streamlining operations, even to the point that a customer has just a single point of contact for the entire buying process, will be crucial, Zuchowski said. So will pricing transparency.

CPO, fixed ops key

With the growth of ride-sharing and eventually autonomous vehicles, millennials will be a group that embraces single-car households at a rate not seen in three generations. That will cut into profits and volumes throughout the industry.

With that in mind, automakers need to help make the existing profit centers as efficient as possible, Zuchowski said. For Hyundai dealers, that means correcting areas in which they have traditionally been weak: used cars and fixed operations.

Hyundai sees certified pre-owned sales as a way to offset declining new-vehicle margins and has been working with its dealers to catch up with other manufacturers' programs. Through April, Hyundai's CPO sales are up 5.6 percent from a year earlier.

The service bay also is fertile ground. In the past, Hyundai dealers haven't paid much attention to first- and second-year service visits (such as for routine oil changes) largely because they don't bring in much money.

But with repurchase rates about 40 percent higher among loyal service customers, Hyundai can pick up additional recurring sales by building service loyalty early. And after that two-year span, the service tickets on the vehicles often start picking up as the customer works through the warranty, Zuchowski said.

Zuchowski acknowledged that his message isn't getting through to all dealers. About half are reluctant to embrace such large-scale upheaval, he said.

"Dealers intuitively accept the premise of the argument," he said, "but when it comes to actually making the changes and changing their business model -- there's 100 years of experience there -- it's difficult to walk away from."

The fact that the surge of millennials into the marketplace is still a few years off isn't helping either. "Dealers still see a lot of people, the majority of their volume, that don't fit what we're describing," Zuchowski said.

Adam Kraushaar thinks dealers need to look at the changes sweeping the industry as more than a "millennial" phenomenon.

"The key thing to focus on is not the millennials per se but the availability of technology and information and how we need to as a retailer incorporate both of those in our experience and our processes," said Kraushaar, president of Lester Glenn Auto Group in Toms River, N.J., and chairman of the Hyundai National Dealer Council.

He agreed that increasing speed and transparency should be paramount for any dealer, regardless of how old the customer base is. Same for the increased focus on CPO and fixed ops that Zuckowski outlined.

But those changes will be evolutionary, not revolutionary, he said, and dealers are wary of manufacturers mandating changes without giving them a chance to figure it out on their own.

"Despite all the talk of millennials and how they buy differently, I do not see any glaring changes in the expectations of our customers based on their ages," Kraushaar said.

"Old learn from the young'

Zuchowski gets that. "Unlike previous generations where the young learn from the old, this is a generation where the old learn from the young," he said.

He's urging his dealers to jump on that learning curve, too.

"My challenge to dealers has been: "You are the original American entrepreneur. You were the innovator; you took the risk. All these other people patterned themselves after you. Don't let them take your turf.'"

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Great concise editorial of what has been shared by other writer for several years and now, reality is the Millennium generations far exceeds the Baby Boomer gen. Great point re Dealers capturing more customer pay service from their independents as millenniums will gravitate to Independents 1st.

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